With the growth in our countries, consumption by the common man has also gone up than it used to be various years ago. This has resulted in many people finding themselves in overwhelming debts or huge loans that they have taken from banks and they are surely unable to pay. From this aspect, there is the need to manage finances or funds for one to avoid landing into debts and also for one to succeed in life. Some of the reasons why it is important to manage personal finances are highlighted below.
Why manage personal finance
To manage personal income
It is important for you to manage your short-term and long-term finances through planning. If you do not plan in life, you plan to fail. Planning helps you to manage the few or scarce resources to the recurring human wants human wants cannot be satisfied and thus it is necessary for one to plan as this enables him or her to understand how much money he or she will need for the payment of taxes, monthly expenditures like rent, water and electricity bills and even how much money one needs to save at the end of the month or every month.
To enable investments
When finances are planned for adequately, there is an increase in cash flow which increases capital. This gives an individual an opportunity to take part in investments that are aimed at improving an individual’s life and financial well-being. Investments in life include personal banking, educating one’s children, starting up business. A proper plan considers an individual’s circumstances, objectives and risk tolerance. An excellent strategy guide and helps you to choose the right type of investments to fit your needs, personality, and goals.
Improving living standards
It is important for one to note that it is important to manage personal finances as saved money enables ones to live and enjoy a better life than the one he or she had before. Savings made from one’s past earnings enable the person to seek services. One can also acquire extra funds to hire people to work in his or her house making, and even one can expand his or her businesses and as a result, generate more profit. One can also advance his or her level of education and enroll her children in better schools to attain a better education.
Achieving financial understanding
Note that apart from improving one’s living standards, the importance of personal finance management is to enable one achieve better financial understanding which can be attained when measurable financial goals have been set by an individual, understanding the effects of decisions made and reviewing the results. This gives one a different and new approach to one’s budget and improves one’s control over her finances. One can achieve a better understanding of finances.
To develop family security
Managing of personal finances enables one to provide for his or her family’s security. Nowadays, there exist life insurances, health insurance and even house and vehicle insurances. When one is bankrupt, he can have his property back when he is a member of an insurance company.